The outgoing head of the European Union executive will hold talks with Netanyahu on Sunday before taking part in a signing ceremony the next day allowing Israel to become the only non-European country to benefit from the EU's Horizon 2020 scientific research programme.

After months of dispute, the two sides agreed on a compromise in November enabling hi-tech companies and research institutes in Israel to join the 77bn euro programme, AFP news agency reported.

EU-Israel relations have long been difficult, notably over Israeli settlements in the occupied West Bank. Brussels on Thursday said that it was "deeply disappointed" after Israel unveiled plans to build another 3,200 settler homes, and called for the decision to be reversed.

"This move is unhelpful to peace efforts," the EU said in a statement.

Israel had objected to EU guidelines published in July banning funding and financial dealings with settlements in the occupied West Bank and annexed east Jerusalem from January this year.

The guidelines would have forced Israel to recognise in writing that settlements, which are illegal under international law, are not part of Tel Aviv in any future EU agreements.

But after negotiations, it was agreed the EU would appendix an agreement to stop research funds serving institutions in the West Bank, while Israel would add its own appendix stating non-recognition of the new guidelines.

Palestinians consider any settlements built beyond the pre-1967 territorial lines to be illegal and an obstacle to peace, while Netanyahu refuses to recognise the 'Green line' as a starting point for negotiations.